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Supervision Aspect as The Instrument of
Law Enforcement in The Activity of
Foreign Investment
1st Isye Junita Melo
Study Program Law Science Faculty of
Social Science Universitas Negeri
Manado
Manado, Indonesia
4th Arinto Nugroho
Law Departement
Faculty of Sosial Sciences and Law
Universitas Negeri Surabaya
Surabaya, Indonesia
2nd Susi Aryani Manangin
Study Program Law Science
Faculty of Social Science
Universitas Negeri Manado
Manado, Indonesia [email protected]
5th Muhammad Akbal
Faculty of Social sciene
State university of Makassar
Makassar, Indonesia
3rd Mahendra Wardhana
Law Departement
Faculty of Sosial Sciences and Law
Universitas Negeri Surabaya
Surabaya, Indonesia
Abstract— As a developing country, Indonesia requires a very
large capital for the establishment of all aspects of Indonesian
people. To implement the development, if only relying on capital
and funding from Government, almost certainly rather difficult
to achieve the goals envisioned by the founders of this Republic.
It is necessary to look for other funding sources. One of the other
sources of funds that can be used is foreign investment. This
study aimed to examine the legal issues that arose due to the
existence of foreign investment activities in Indonesia. As for the
objective of this study is to describe and analyze the enforcement
efforts by using supervision aspects of the implementation of
foreign investment in Indonesia. As for the research method used
is normative legal research through two types of approaches that
are Statute Approach and Conceptual Approach. Based on the
research findings the instruments which should be prepared in
the law enforcement process are a legal instrument which
provide legal certainty and supervision instruments by the
government and the law enforcement officials. With the
optimaliization of control measures as a follow up of the
permission granted for the implementation of foreign investment
in Indonesia then the violation can be minimized.
Keywords—Aspects of Supervision, Law Enforcement, Foreign
Investment.
I. INTRODUCTION
Investment, especially foreign investment until
now remains became one of important factors to mobilize
and to sustain economic growth. In mid of 1997 Indonesia
experienced monetary crisis. This monetary crisis begun by
the depreciated of Rupiah exchange towards US dolar. The
depreciation of Rupiah exchange more and more significant
so that the monetary crisis that arose continued to be
economic crisis which caused the economic growth running
very slow [1]
One of the ways to re-generate or to re-mobilize
national economy such as it used to formerly before
monetary economic occurred is a policy to invite investment
in Indonesia. Investment, especially foreign investment until
today is an important factor to mobilize and foster economic
growth.
There are many factors which caused the arousal of
indisposition of the investment to get into Indonesia. The
factors that can support the insvestment flows to get into a
country, like security insurance, political stability, and law
assurance, apparently became a particular problem for
Indonesia. The current regional autonomy that even being
implemented in Indonesia consider to be a new problem in
the investement activity in several regions.
Due to the prevailing of Act, law No. 22/1999th
jo
Act No. 32/2004th regard with Regional Government,
Indonesia got into a new era in relation to the inter-center
government and regional government. Indonesia had been
entering the regional autonomy era. New condition really
had into an account by the investors concerned with the
negative effect that emerged by it.
In the reformation era, Government attempted
precisely to attract foreign investment as much as possible
through the sequence of national visitation abroad,
privatization of State-owned Enterprises, law supremacy
enforcement, and revision towards various Act, Law regard
with business and tax investment, state strcture and so on
and so forth. All these attempts surely aimed to create a
world business climate in the country which is more
conducive in order to increase capital inflow which in its
turn expected to increase society welfare.
Participation of foreign enterprises in investment
activity in Indonesia were meant to be as a complementer to
fill the labor sectors and industry which is unable to be fully
conducted yet by national private party, whether the reason
is technology, management or financial capital. Foreign
capital expected can stimulate the climate or world labor life
directly or indirectly as well, and also able to be used as
attempt to break through the international marketing
network through the link they had. The next is foreign
1st International Conference on Social Sciences (ICSS 2018)
Copyright © 2018, the Authors. Published by Atlantis Press. This is an open access article under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Advances in Social Science, Education and Humanities Research, volume 226
711
capital expected can foster the process of economic growth
of Indonesia directly.
The main consideration of a country to optimalize
the investement role whether it is foreign or domestic is to
alter the economic competence into real economic power I
order to increase economic growth. The role of investment
was not merely as the best alternative of funding sources for
establishment compare to foreign loans, but also crucial as
the tool to integrate economic of a nation in global economy
[2]. Besides, investment can produce multiplayer effect
towards national economic establishment not merely
transferring capital and goods, but also to transfer
knowledge and human resources [3], expanding work field,
developing import substitution industry, to economize
foreign exchange/devisa, sustaining non-oil and gas export
to gain foreign exchange, technology transfer, buiding
infrastructure, and developing underdeveloped regions.
Therefore there are a lot of countries, unexceptionally
Indonesia, which made investment activity as the part of its
national economic organizing [4].
It is recognized that investment activity was really
needed by a country in sustaining the process of
eastblishment. However, behind the necessity of that
investment, there are some main problems that need to be
taken onto consideration by the government and requires a
serious handling. One of the matters is regard with law
enforcement [5].
Law enforcement in Indonesia viewed still weak
since until present day there are some investment law cases
that had not been enforced yet such as PT. Lapindo Brantas,
Porong, Sidoarjo East Java and case of PT. Newmont
Minahasa Raya at the Buyat Bay, North Sulawesi.
Law enforcement in various cases of polluting and
violating nature through supervision instrument that valued
as weak, caused by the complexity of aspect that arouse in
the process of nature law enforcement. So many cases which
frequently experience over suppressed towards social,
economy, and politic factors which notably fully human
creation [6]. From this phenomenon then the handling of
polluting becomes a peculiar problem and requires inter-
sectoral handling efforts [7] .
From the background elaboration then the
problems of this research were formulated as follow: (1).
How is the law enforcement effort towards investment in
Indonesia? (2). What is the implication of supervision aspect
as the instrument of law enforcement at the foreign
investment activity?
II. RESEARCH METHODS
This research used normative law research method,
which was an investigation recognized generally in law
science to investigate/ to learn the positive law substance
textually (not merely towardsnorms, but also principles,
even value contained in it) [8].
Research approaching method which used in this
research is approach that customized with research type that
being conducted, whereas, this research is normative
judiciary research (legal research). As stated by reference
[8] there are 5 (five) approaches which used in the law
study, which are constitutional approach (statute approach),
case approach, historical approach, comparative approach,
and conceptual approach.
Based on indicator contained in this research and
various approach methods in law research, so that the
approach which used more focused on 2 (two) approach
methods that are statute approach and conceptual approach
[9].
Legal material which required are in the form of
whether it is primer material, secondary legal material, or
tertiary legal material yet in for all the problems which had
been formulated can be sloved well, then in order to
complete it, requires an explanation, information, or opinion
which directly attained from the law experts 10
.
Thus, legal material technique which used in this
research is library research technique that collecting,
learning and investigating legal material that relevant with
the formulated problems, whether it is primer material,
secondary legal material, or tertiary legal material.
Primer legal material consists of Constitution of the
Republic of Indonesia 1945, constitutional regulation law
which are Act, Law No. 25 2007 about investment, Act,
Law No 32 2004 about Regional Government, Government
Regulation No. 38 2007 concerned with Divisions of
Governmental Affairs inter-Governments, Province
Government, and regional government District/City,
President Decree No 27 2009 concern with Integrated One
Door Service, regulation of head of Capital Investment
Coordinating Board No 11 2009 about the mechanism of
Conduction, Executing, Advising, and Reporting Integrated
One Door Service in Investment Field and other
constitutional regulation concerned with this research.
Secondary Legal Material is legal material which explained
about primer legal material to aiding analyze the problems
so that the deep comprehension concern with statute
regulation could be found. Therefore, it requires literature
books, hournal regard with the topic research which
obtained through website or blogs of law experts, and
another law witing which relevant with the problem.
In this research, legal material obtained presented,
categorized, and Compiled sistematically for then later
would be analyzed with the technique of abstracting
regulation of Act, Law existed so that it can answer the
question or solve the problems in this research. This analysis
is Judiciary qualitative analysis that refers to research
materials that leads to theoretical investigation concern with
concepts, norms, or law. Analysis of legal material which is
analytical descriptive. In qualitative judiciary analysis
method, the legal material or research object not merely
described as it is, but also will be given an argument regard
with aspect of supervision as the instrument of law
enforcement at the capital investment activity [10].
III. RESULTS AND DISCUSSION
As explained on the background above can be seen
that the existence of investment was not merely give
positive effect but also negative towards host country
(capital receiver). The negative effect which arouse become
a must to have a full attention not merely from central
government but also regional government and wide society
[11].
Basically, multi-national enterprises that came to a
country aimed to seek for advamtages. Which in the activity
Advances in Social Science, Education and Humanities Research, volume 226
712
they ‗‘absorbed‘‘ the natural resources existed, dominating
market (whether the existed one and beneficial or the new
emerged one) and presses production cost by mobilize cheap
laborer in the developing country [11]. For instance,
Foreign Direct Investment-FDI like this are Canadian
mining enterprises which opened mining in Indonasia or
palm oil company Malay which take over palm garden in
Indonesia. Cargill, Exxon, BP, Heidelberg Cement,
Newmont, Rio Tinto dan Freeport McMoRan, dan INCO
those are possessed direct investment in Indonesia [12].
Viewing the main purpose of these foreign
enterprises, which in its principle seeking benefit at the
particular developing country so that it is frequently found
various viloations which committed by the foreign investor
which directly or indirectly also engaging government
whther central or regional. The activity of foreign
investment strongly concerns with the lisence. Whether
lisence given by the central government or regional
government. So that through the lisence that given by
government then a capital investing enterprise able to
commit its business activity in Indonesia.
A. The Attempt to Enforcing Law of Capital Investment in
Indonesia
Indonesia is law-state. This concept is in
accordance with what mandated in Constitution of Republic
of Indonesia 1945 which is at the Chapter 1 alinea (3) which
stated that ―Indonesia is a law-state‖. As the consequence of
Indonesia as the law-state which based on Pancasila and
Constitution of Republic of Indonesia 1945, then all aspect
of life and society division, the nationality and state
including government must always based on the law.
As the law-state, then in the conduction of state
government eventually unseparable with the Statute
Regulation as the positive law which prevailed in Indonesia.
Law-state Concept had born a year before Christ,
whereas this concept developed by Plato and Aristotle, and
then at the 19th
century, concept of Law-State more
developed by AV Dicey with his concept Rule of Law yang
developed in the continental Europe Nations, and Frederich
Julius Stahl with his concept Rechtsstaat which developed
in Anglo Saxon countries.
In its development the concept of law-state then
experienced improvement, and generally can be seen as
follow:
1. The state government system which based on people
authority;
2. That government in running his duty and responsible
should b ebased on law or statute reguation;
3. There is a warrantee towards human rights (citizen);
4. There is a power distribution in the state;
5. There is a supervision from rechterlijke controle which
is free and independent, in other words that court
institution/ judicial was impartial and not being under
executive control;
6. There is a real role from people or citizen to engaged
together supervising the creating and conduction of
wisdom which commited by the Government; there is
economy system which able to guarantee the prevalence
distribution of resources needed for the citizen‘s welfare.
Conceptionally, then the essence and meaning of
law enforcement is at the activity of matching the relation of
translated values in the steady principles manifest and the
attitude as the final sequence of value description, to create,
preserving, and maintaining peaceful life kinship.
The essence of law enforcement actually was on
the factors that probably affecting it. The factors meant
neutral, so that the positive or negative effect were on the
content of those factors. Those factors are as follow:
1. Its own law factor, in this case bound by mere Act, law.
2. Factor of law enforcer, which are the parties who formed
or implementing law.
3. Factor of infrastructure which supported law enforcer.
4. Factor of people, which is neighborhood where that law
prevailed or implemented.
5. Cultural factor, which is as the work result, creation, and
feeling which based on will of human in living the life.
Those five factors are correlated strongly, since it
was the essence of law enforcer, a standard of law
enforcement effectiveness as well.
In the development of law-state concept
experienced a perfecting action, which generally areas
follow, (1) Governmnet state system were based on people
sovereignty, (2) that government in conducting duty and
responsible should be based on constitution, (3) thereias an
insurance towards human rights (citizen), (4) there is power
distribution in the state (5) there is a supervision from
rechterlijke control which is free and independent, in terms
of court institution really impartial and not being under
executive control, (6) there is a real role from the members
of society or citizen to altogether engaging in supervising
the creation and conduction of wisdom which committed by
the government, (7) there is economic system which can
assure the prevalence distribution of resources which
required for the welfare of the citizen
B. Aspect of Supervision as the Instrument of Law
Inforcement at the Foreign Investment
Based on Chapter 27 Act, Law No. 25/2007 about
capital investment, then government coordinating the policy
of capital investment, whether inter-instances coordination
with Bank of Indonesia, inter-government instances with
reginal government, or inter-regional government.
Coordination of execution of capital investment were
committed by Capital Investment Coordinating Board
(BKPM). BKPM is an independent and non-department
instance which responsible directly towards President.
President then determined Presiden Decree No. 90/2007
about Capital Investment Coordinating Board on September
3rd
2007 (―Perpres No. 90/2007‖).
In accordance with chapter 28th Act, Law No.
25/2007 about Capital Investment and Chapter 2 President
Decree (Perpres) No. 90/2007, then BKPM have the main
duty to execute coordinating of the policy and the service in
the capital investment based on rules and constitution.
With the authority which given to him, BKPM
released regulation Head Regulation BKPM No. 13/2009
regard with the guideline and mechanism of Conduction
controlling the execution of capital investment at Desember
23rd
2009 (―Perka BKPM No. 13/2009. Controling of
Capital Implementation was aimed implementing
Advances in Social Science, Education and Humanities Research, volume 226
713
monitoring, coaching, and supervision towards the
implementation of capital investment according to the
rights, obligation and responsibility of the investor.
The aims of capital implementation controlling is
in order to be able:
1. To obtain data development on realization of capital
investment and information of problems and obstacles
that are facing by the enterprise;
2. To guiding and facilitating problems solving and
obstacle that the enterprise is dealing with;
3. Supervising the implementation of capital investment
regulation and utilizing of fiscal facility and taking
further action towards the deviation that committed by
the enterprise.
Thus, expected that the smoothness and appropriateness of
capital investment implementation would be achieved and
also the availability of capital investment realization data as
well.
The controlling of capital investment was an
instrument of law enforcemnt. As an instrument of law
enforcement so that the regulation on supervision of
investment implementation were regulated chapter 6th
letter
(c) Perka BKPM No. 13/2009 and conducted through:
1) The research and evaluation on information of capital
investment provision implementation and facility that
had been given;
2) The observation at the location of capital investment
project; and
3) Further follow up towards the deviation of
capitalinvestment provision.
The board that authorized on the implementation of capital
investment are:
a. Regional device District/City Division Capital
Investment (―PDKPM‖) towards the whole activity of
capital investing in the district/city;
b. Regional device Province Division Capital Investment
(―PDPPM‖) towards the investment which the activity is
cross-district/city and based on legislation were become
the authorized of province government;
c. BKPM towards fiscal facility using of capital
investment which become government authority;
d. Technical instance towards the implementation of
capital investment in accordance with the provision
regulation which regulate the business activity.
In implementing supervision as mentioned above,
PDKPM committing coordination with the instance of the
regarded region. Meanwhile, PDPPM conducting
coordinating with PDKPM and instance of regarded region,
whereas BKPM committing coordination with PDKPM,
PDPPM and instance related.
The implementation of investment in this case
foreign investment definitely requires a set of lisence
whether released by instance of central government or
regional government. As the consequence of the releasing
lisence in order to investing foreign capital investment so
then it requires a supervision action. Supervision at its
principle was conducted as the preventive attempt whether
the activity of capital investment had been implemented and
according to the provision existed.
As the supervision commonly committed at the
enterprise activity of foreign investment in mining sector.
When the enterprise earned the mining business lisence
(IUP) then the supervision function must also been
implemented as well. Supervision at the mining business
management on its principle aiming IUP holder more
directed in committing the activity in its sequence with
mining business, so that it would not deviate from the order
and prohihibition that were determined in the lisence.
Theoretically George R. Terry stated that
supervision was aimed to determine what had been
achieved, evaluate and appllying corrective action if needed
to assure the result as planned. 14
Relevant with that thought,
then the supervision absolutely required in the sequence
with the management of mining business in accordance with
the principle of supervision objective which is not deviate
from the command and prohibition that were determined in
the lisence. Therefore, as the part of management function,
the planning become crucial for the effectiveness of
supervision duty and as realization from the law
enforcement as mandated by legislation.
Planning is absolutely required to begin the
implementation of supervision to realize law desire which
contained command and prohibition in the capital
investemnt law, particularly foreign investment. Supervision
naturally were pointed to prevent misunderstanding and
showing way and the right objective.
In the foreign capital investment which notably
directed most of its activity on mining activity hence the
instrument of supervision is crucial to be done considering if
that supervision did not run well then, the consequence is
we will lose most of the natural resources existed.
IV. CONCLUSION
The attempt of law enforcement basically refers to the
factors that affecting it and meaning as neutral, the factors
meant are as follow: (1). Its own law factor, in this case
restricted merely by the legislation. (2). Law enforcer factor,
which is the parties that formed or implemented the law. (3).
Infrastructure and facility factor which favored law
enforcement. (4). Society‘ factor, which is neighborhood
whereas that law prevailed or implemented. (5). Cultural
factor, which is as the masterpiece, creation, and feeling that
based on human will in living life.
As the the developing country, which enclosed
theselves towards the entrance of foreign investment to
sustain the establishment so that Indonesia requires to
complete the legislation regulation device existed in the
investment sector which contained law insurance. Had not
so, then various problems will arise which can harm the
nation and country affairs.
Beside readiness of legislation device in the process of
enforcing the law so that one of another instruments that
should be prepared is instrument of supervision. By the
existence of otimalization of supervision act as the further
action of the given lisence for the implementation of foreign
investment activity in Indonesia then the overruling action
towards the implementation of PMA can be minimized.
Advances in Social Science, Education and Humanities Research, volume 226
714
ACKNOWLEDGMENT
Profound gratitude to the Rektor of Universitas Negeri
Manado, Dean Faculty of Social Science Unima, Conuctor
committee and atlantis press publisher.
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